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TMI Blog2010 (2) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... a director of the company then the official liquidator be permitted to implead the said person as accused No. 3 to this proceedings and process be issued against him. (iii)That, accused Nos. 1 and 2 be also directed to submit forthwith the statement of affairs to the complainant as on the date of winding up order dated November 29, 2007, with full details as per the pro forma prescribed under the Companies (Court) Rules, 1959. (iv)That, the above accused Nos. 1 and 2 be directed to attend office of the official liquidator for recording statement under rule 130 of the Companies (Court) Rules, 1959. (v)That, the complainant's cost and charges incidental to these proceedings may be provided for under section 626 of the Companies Act, 1956. (vi)Such other order/orders as this hon'ble court may deem fit and proper and in the interest of justice may be passed." 2. The complaint is based upon the following averments made in paragraphs Nos. 4 to 8 which read as under : "4. That as per the provisions of section 454 of the Companies Act, 1956, the ex-directors of the company were required and legally bound to file with the official liquidator as to the statement of affairs of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso sought inspection of the records of the company in liquidation, the said application had not been decided nor any inspection provided till the matter was taken up for hearing by the court on May 8, 2008. Accordingly the official liquidator was directed by the court to give inspection of the records of the company in liquidation to accused No. 1 and the official liquidator was also permitted to deseal the premises for granting inspection. 4. Thereafter, it appears that inspection was given on June 6, 2008, in compliance with the order made on May 8, 2008, but as the inspection was incomplete, the accused sought for one more day to complete the inspection. As the said request was not granted by the official liquidator, on July 2, 2008, the court directed the liquidator to file a report in this regard. 5. In compliance with the order dated July 2, 2008, a report dated July 14, 2008, was tendered by the official liquidator and in paragraphs Nos. 3 and 4 it was stated : "3. That, the official of the official liquidator provided the inspection on June 6, 2008, to the representative of ex-directors Shri Rajubhai R.Ashara, who carried out the inspection of records and prepared the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial liquidator had called upon the accused to submit the statement of affairs as required under section 454 of the Act within a period of 21 days and in the said communication, the period of 21days was specifically referred to as "within 21 days from the date above". The submission on behalf of the accused was that the date above could either mean the date of the order which was November 29, 2007, or the date of communication which was December 7, 2007. The accused had immediately on receipt of the communication responded vide letter dated December 17, 2007. In the said letter dated December 17, 2007, it is stated: (i) that as all the records are lying in sealed premises in the custody of the official liquidator it was not possible to submit the statement of affairs within 21 days from the date of the order made by the High Court, and (ii) to extend the time limit up to three months for submitting the statement of affairs. That the official liquidator did not respond either favourably or by rejecting the request made by the accused, and therefore, the accused was not in a position to submit the statement of affairs, nor seek further remedy. In the circumstances, it was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 454 of the Act, to submit that the official liquidator was not duty bound to inform any person, specified in sub-section (2) of section 454 of the Act, to file the statement of affairs, because the order of winding up was a public document of which the person concerned, who is liable to file the statement of affairs, is supposed to know and therefore the submission on behalf of the accused that the application for extension of time had been made within 21 days from the date of receipt of communication dated December 7, 2007, from the official liquidator should not be accepted. 13. Referring to section 454(5A) of the Act it was submitted that once summons was issued by the court, cognizance of an offence was deemed to have been taken and thereafter only recourse open to the court was to try the accused in accordance with the prescribed procedure. That in the present case the court having already issued summons had to proceed with the trial and could not pass any order at an interim stage for either dropping the prosecution or exonerating the accused. 14. In the rejoinder, the learned advocate for the accused placed reliance on the judgment of this High Court rendered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e)such further or other information as may be prescribed, or as the official liquidator may require. (2) The statement shall be submitted and verified by one or more of the persons who are at the relevant date the directors and by the person who is at that date the manager, secretary or other chief officer of the company, or by such of the persons hereinafter in this sub-section mentioned, as the official liquidator, subject to the direction of the Tribunal, may require to submit and verify the statement, that is to say, persons- (a)who are or have been officers of the company ; (b)who have taken part in the formation of the company at any time within one year before the relevant date ; (c)who are in the employment of the company, or have been in the employment of the company within the said year, and are, in the opinion of the official liquidator, capable of giving the information required ; (d)who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates. (3) The statement shall be submitted within twenty-one days from the relevant date, or within s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lauses (a) to (e). 18. Sub-section (2) of section 454 of the Act stipulates the person(s) who is liable to submit the statement. A plain reading of sub-section (2) makes it clear that the primary onus to submit the statement is on the directors, who are directors at the relevant date, and the persons who are either the manager, secretary or chief officer of the company at the relevant date. The latter part of the sub-section which follows the term "or" indicates that in the alternative, persons mentioned in the sub-section thereafter would be, subject to direction of the court, required to submit and verify the statement at the discretion of the official liquidator. Such persons are specified in clauses (a) to (d) of sub-section (2) of section 454 of the Act. In other words, the first part of the section requires anyone of the specified category of persons like directors, etc., to submit the statement of affairs whereas persons mentioned in the second part of the provisions are those who may be called upon to furnish the statement provided the official liquidator so requires, but this is subject to the condition that a direction in this regard should have been sought for and made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... envisaged is non-filing of the statement of affairs either simplicitor, or in compliance with the requirement of sub-section (1) by the person(s) specified in sub-section (2), and beyond the stipulated period set out in sub-section (3). However, the crux of the issue is whether such default is without reasonable excuse. The Legislature has used the term "excuse" after the word "reasonable" and not the term "cause" and therefore the provisions will have to be understood and read in that context. 23. As against that sub-section (5A) of section 454 of the Act empowers the court which made the winding up order or appointed the provisional liquidator to take cognizance of an offence in exercise of discretion upon receiving a complaint on facts constituting such an offence and conducting the trial thereof as per prescribed procedure. 24. Sub-sections (6) and (7) of section 454 of the Act relate to a person answering the description of a creditor or contributory of the company being entitled to inspect or obtain a copy of the statement submitted as required by the earlier part of the provision, upon payment of the prescribed fee, and being prosecuted if found to be untruthfully presenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s called upon to comply with the statutory obligation ; (iii) that the circumstances of the case reveal that he could have filed the statement of affairs if he was minded to do so ; and (iv) that he did not comply with the requirements of law within the prescribed period, to hold him liable under sub-section (5) of section 454 of the Act. The burden of proving both the ingredients constituting an offence under sub-section (5) of section 454 of the Act rests on the prosecution. Unless both the requirements are established, a conviction under the said sub-section cannot be sustained. Now, the expression 'burden of proof' has two distinct meanings, namely, (i) the burden of finally establishing the case ; and (ii) the burden of introducing evidence to discharge the onus. The former, that is, the statutory burden, never shifts and remains fixed on the prosecution throughout while the latter fluctuates during the course of evidence tendered by the contesting parties in court. The latter burden becomes academic once the evidence concludes. The court is then required to evaluate the evidence as a whole to come to the conclusion whether the prosecution has discharged the former, that is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he defence to show that there was reasonable cause for not complying with the requirements of section 454 of the Act. If the defence fails to discharge this burden, the primary facts proved by the prosecution would be sufficient to hold that the statutory burden which remains constant has been discharged by the prosecution. The view expressed by the Full Bench of the Delhi High Court in the aforementioned case has been accepted by a Division Bench of the Punjab and Haryana High Court in K. S. Mathura Dass v. State of Punjab [1977] 47 Comp Cas 467 and the Kerala High Court in Official Liquidator v. Smt. K. Indira [1983] 54 Comp Cas 644. These decisions, therefore, support the view that Itake and I am in respectful agreement with the view expressed by the Full Bench of the Delhi High Court on the question of burden of proof." 26. Therefore, in the first instance upon a complaint being presented by the official liquidator the court shall have to ascertain whether any default has been committed. For proving prima facie commission of default the official liquidator shall show : (i) the concerned person has knowledge of the order of winding up, by notice or otherwise ; (ii) the prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on having been taken over by the official liquidator directly from the secured creditor. Referring to the fact that accused No. 1 was aged 67 years with ailing health, a request was made to permit the authorised representatives to enter the premises and inspect the record for the purpose of preparation of the statement. Admittedly, the said communication dated December 17, 2007, was not replied by the official liquidator despite the fact that the official liquidator refers to the provisions of sub-section (3) of section 454 of the Act in paragraph No. 5 of the complaint. 29. This aspect has to be appreciated in the light of rule 128 of the Companies (Court) Rules, 1959, which reads as under : "128. Extension of time for submitting statement.-(1) Where any person required to submit a statement of affairs under section 454 requires an extension of time for submitting the same, he shall apply in the first instance to the official liquidator who may, if he thinks fit, give a written certificate extending the time, which certificate shall be filed with the proceedings. The certificate shall be in Form No. 59. (2) Where the official liquidator refuses to grant an extension of time for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for extension of time. It is, however, contended on behalf of the Revenue that the applications which were made on behalf of the assessee were not made in the prescribed manner inasmuch as they were not signed by the person authorised to sign on behalf of the assessee. The ITO, therefore, could have ignored these applications. In other words, according to the Revenue, it was not incumbent upon the ITO to render his decision on the applications made on behalf of the assessee. As pointed out above, proviso to sub-section (1) of section 139 empowers the ITO to extend the date for furnishing the return. It is obvious that there is a corresponding duty on the ITO to render his decision on the application made to him and communicate it to the assessee concerned. He has no doubt discretion whether or not to extend the date, but such discretion has to be exercised judicially and not arbitrarily. In other words, he has to exercise the discretion fairly and reasonably. He, however, cannot refuse to use discretion one way or the other and ignore the application for extension made to him in the prescribed form. If the application is not made properly or it suffers from some defect, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention on behalf of the official liquidator that once the period of three months, after expiry of period of twenty-one days, is over, on the basis that extension of three months was granted, the default would commence and would continue till the point of time the statement of affairs is filed also cannot be accepted. At the cost of repetition it is required to be stated that if such a view is adopted, it would tantamount to omitting the phrase "without reasonable excuse" from sub-section (5) of section 454 of the Act. Reasonable excuse does not necessarily mean only filing of an extension application and obtaining such extension for the maximum period of three months. The two concepts cannot be mixed up or rolled into one to interpret the provision. This is more so when the consequence of the failure can lead to imprisonment, or fine, or both. The examination as to whether there is reasonable excuse or not, has to be independent of whether the extension was prayed for, granted or refused. To put it differently, the stage for seeking extension is prior to the point of time when the statement of affairs has to be prepared and filed. Normally, natural human conduct would indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be sufficient to sustain the present proceedings. It is well-settled law that the charge has to be specific and cannot be modified or substituted during the course of the proceedings. Again at the cost of repetition it is required to be stated that it is for the prosecution to establish that the default, even of the nature of defective or incomplete statement of affairs, is without reasonable excuse. Therefore, the submission made on behalf of the official liquidator in this regard cannot be accepted. On facts it is necessary to note that admittedly the statement of affairs was filed on December 16, 2008, while the complaint was filed on January 21, 2008. Hence when the complaint was filed, in absence of the statement of affairs, prosecution could not have made out a charge of defective or incomplete statement of affairs. 38. One of the prayers is seeking a direction to the two accuseds to attend the office of the official liquidator for recording statement under rule 130 of the Companies (Court) Rules, 1959. A plain reading of rule 130 indicates that the said rule permits the official liquidator to hold personal interviews with any of the enumerated persons, mentioned in se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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